Seattle Living Wage Surcharge Subject to Sales Tax

The minimum wage in Seattle, Washington, increased to $11/hour on April 1, 2015. Subsequent gradual increases will eventually bring the wage to $15/hour. A similar minimum wage increase for transportation and hospitality workers in nearby SeaTac (home to Seattle-Tacoma International Airport) has been challenged but was recently cleared by the Washington Supreme Court.

Response in the business community has been mixed. Some restaurants have opted to close shop, others to trim hours or staff. Taking a different approach, Tom Douglas has opted to raise prices. The city’s most famous chef doesn’t know how much more people are willing to spend for a plate of food but says that he’d “rather have people make a living wage instead of selling more chicken” (NPR).

Some businesses have opted to add a “Living Wage” surcharge to invoices “to offset the cost of having to pay their workers a higher minimum wage.” The Washington State Department of Revenue reminds that both business and occupation (B&O) and retail sales taxes apply to Living Wage surcharges on restaurant invoices.

As a general rule of thumb, surcharges apply to the same tax that applies to the billing. See the DOR notice on surcharges for additional information.

Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.